Canada and the world are once again staring “crisis in the face,” as contagion from Europe’s debt meltdown spreads beyond its borders, Finance Minister Jim Flaherty said Friday.

“Ongoing uncertainty stemming from the European sovereign and banking crisis is leading to broader contagion outside Europe and global credit markets,” Mr. Flaherty said according to the prepared text of a speech he was delivering in Toronto.

“We are not immune to challenges that emanate from beyond our borders,” he said. “Again today, we are staring a crisis in the face.”

Mr. Flaherty said Ottawa is open to further economic stimulus if the European debt crisis threatens to derail the country’s recovery.
“We stand ready to respond again in a flexible and pragmatic manner if the economic challenges from beyond our shores begin to threaten jobs and the economy here,” he said.

But he added a cautionary note: any additional stimulus will be targeted. The Conservative government will not abandon its goal of eliminating the budget deficit “in the medium term” and will forge ahead with plans to slim down government spending.

“So while we will act as necessary, we will always ensure that any government spending is targeted and effective,” he said.

Mr. Flaherty repeated his view that the European sovereign debt and banking crisis is the No. 1 threat to Canada and urged his European colleagues to move aggressively to solve it “in double time.”